17.30 (CLOSE): European markets lagged behind Wall Street today as speculation over America's talks on the looming fiscal cliff continued to drive sentiment.

Comments from House Speaker John Boehner that suggested discussions are making progress offered some comfort to US traders, with the Dow Jones Industrial Average up by 0.5 per cent at the time of London's close.

But the improvement was too little to keep London's FTSE 100 Index out of the red as it closed 9.6 points down at 5912.1.

Power out: Temporary power provider Aggreko saw shares slide by a fifth as it struggles to fill the void left by its £59m London Olympics contract.

The outcome of the talks are pivotal to the progress of world markets in 2013 as the US looks to avoid an automatic package of steep tax hikes and budget cuts on January 1.

The pound was up against the US dollar at 1.62 amid the uncertainty, and was also up against the euro at 1.23.

In London, one of the market's rising stars of recent years was dimmed by a second gloomy update in the space of as many months.

Temporary power provider Aggreko's
warning that its 2013 performance was likely to be slightly lower than
this year, as it struggles to fill the void left by its £59 million
London Olympics contract, caused shares to slide by a fifth.

The decline of 461p to 1664p took the company's price back to near where it started 2012.

Vodafone put pressure on the top flight as shares fell 2.75p to 158.2p after Dutch authorities raised £3 billion from their auction of the 4G spectrum, fuelling speculation that the UK version will reap more than forecast.

Brian Potterill, PwC's director of telecoms strategy, now expects the UK's 4G auction will raise the high-end of his previous £2 billion to £4 billion estimate.

Elsewhere in the top flight, shares in National Grid were 1 per cent lower after Ofgem said it would allow companies to spend £24.2 billion on new and upgraded infrastructure, more than the £22.7 billion proposed by the regulator in July.

But the figure is still short of the £29.4 billion originally requested by the industry, raising the prospect of a drawn out referral to the Competition Commission. National Grid was 5p lower at 703p.

Meanwhile, retailers were doing well as analysts gauged the performance of the sector in the final days before Christmas.

Many shopping centres reported a busy weekend of trade and John Lewis said it posted record weekly sales of more than £140 million for the second week in a row.

Primark owner Associated British Foods added 12p to 1530p, while outside the top flight Dixons Retail Group improved 0.5p to 28p, Sports Direct International was 13.8p higher at 381.2p; and Debenhams rose 0.8p to 115.5p.

The biggest FTSE 100 risers were International Consolidated Airline Group up 5.8p to 179.5p, Kazakhmys ahead 24.5p to 782.5p, Rio Tinto 80p higher at 3470p and Evraz up 4.8p to 266.5p.

The biggest FTSE 100 fallers were Aggreko down 461p to 1664p, Wood Group off 13.5p to 720.5p, Vodafone 2.75p lower at 158.2p and British American Tobacco down 51p to 3194p.

16.15: Investors kept their money off the table today as continuing talks over the US budget deficit sapped appetite for risk, the Footsie drifting 25.1 points lower to 5896.5, a fall of nearly 0.5 per cent.

However, the Dow Jones was up 64 points on opening (or 0.5 per cent) at 13,199.3.

David Madden, market analyst at IG, said: 'It’s the same old thing in Washington - the Democrats want higher taxes for the top earners and the Republicans won’t budge an inch. Neither party wants to be the one that pushes the economy off the cliff, but equally neither wants to back down.

Trading week before Christmas: Traders react to early market moves on the London Stock Exchange

'I think both sides will continue to
play chicken as long as they can, but in the end someone will buckle.
While President Obama and John Boehner continue the negotiations, stocks
bounce along - but don’t expect any great shakes.'

And Alastair McCaig, also at IG,
added: 'By the time the [London] market opened the negativity from
Aggreko’s announcement and lacklustre European markets had taken their
toll. This resulted in the FTSE spending all day in the red.

'The markets have passed the day
absorbing the news that a conservative Japanese government has come to
power, having been elected on its strong quantitative easing policies.
It appears that 2013 could well be another year where printing presses
are in full flow, as currencies continue their love affair with
devaluation.'

And retailers were doing well as analysts gauged the performance of the sector in the final days before Christmas.

Many
shopping centres reported a busy weekend of trade and John Lewis said
it posted record weekly sales of more than £140million for the second
week in a row.

B&Q owner Kingfisher rose 0.75p
to 277.1p and Primark owner Associated British Foods added 6.5p to
1524.5p, while outside the top flight Sports Direct International was
19.35p higher at 386.75p and Dunelm rose 7p to 649p.

10.45:

The Footsie is down 35 points now, or 0.6 per cent.

David Madden, market analyst at IG,
said: 'Traders are torn between the east and the west today. The news
that Shinzo Abe won the latest Japanese elections drove stocks higher
overnight, but the dreaded fiscal cliff has taken the edge off his
victory.

'He is in
favour of further monetary easing, and stocks rallied as investors feel
he is likely to appoint a governor to the Bank of Japan (BoJ) who will
toe the line.

'Aggreko
is down over 16 per cent, with uncertainty over Japanese contracts and a
diminishing US military presence in Afghanistan to blame for weak 2013
forecasts.'

10:00:

The Footsie is on the back foot, down
26 points (0.4 per cent) now at 5,896, as fears over the outlook for
next year dimmed one of the London market's rising stars.

Temporary power provider Aggreko's
warning that its 2013 performance was likely to be slightly lower than
this year resulted in a 17 per cent slump in shares, a drop of 371.5p to
1753.5p.

It took the company's price back to near where it started 2012 and provided a gloomy backdrop for the leading index of shares.

Vodafone put pressure on the top
flight as shares fell 3.6p to 157.35p after Dutch authorities raised
£3billion from their auction of the 4G spectrum, fuelling speculation
that the UK version will cost more than forecast.

Elsewhere in the top flight, shares
in National Grid held firm after Ofgem said it would allow companies to
spend £24.2 billion on new and upgraded infrastructure, more than the
£22.7 billion proposed by the regulator in July.

But the figure is still short of the
£29.4billion originally requested by the industry, raising the prospect
of a referral to the Competition Commission. National Grid was 1.75p
lower at 706.25p.

08.15:

The FTSE 100 has slipped slightly on opening, down 7 points (0.1 per cent) to 5,914.

London's leading index closed down 7.8
points, or 0.1 per cent at 5,921.7, having seen a run of six days of
continuous gains snapped on Thursday.

Over
the week the index gained under 0.1 percent as weakness in the energy
sector - following cautious broker comment - countered gains by the
miners after strong manufacturing data from China.

No important UK economic data is due
today, though the final full trading week of 2012 will see the release
of November consumer price and producer price inflation numbers,
November retail sales figures, together with the final reading for
third-quarter British GDP, and the publication of minutes of December's
Bank of England Monetary Policy Committee meeting.

Across the Atlantic, December's Empire State index will be released at 1330GMT.

More...

STOCKS TO WATCH

BANKS: UK banks are facing the
backstop threat of a break-up if they fail to comply with the proposed
ringfencing of their retail operations, writes the Financial Times.

Barclays Bank: The lender has denied
that it manipulated electricity markets and predicted in a tersely
worded regulatory filing that the US Federal Energy Regulatory
Commission's case, and proposed record penalties, will not hold up in
court.

Royal Bank of Scotland: The UK lender
is braced for a penalty of more than £350million for its role in a
global interest rate rigging scandal, the Sunday Times newspaper
reported, without citing sources.

BP: The oil major is seeking to change
the terms of its contract with the Iraq government for the super giant
Rumaila oilfield, according to the Financial Times.

Trafigura: The controversial oil
trading group that was forced to pay millions of dollars relating to
toxic waste spills, could raise billions in a London Stock Exchange
flotation next year, according to various newspapers.

GlaxoSmithKline: The pharmaceutical
firm's drug to treat inhalational anthrax was approved by the US Food
and Drug Administration on Friday.